Archive for May, 2012

Tax debt and accruing back taxes can be a burden on individuals, families and even businesses. There a number of reasons people can find themselves owing back taxes to the IRS.

Oftentimes when they get into this debt, it begins to spiral. It can be an embarrassing situation that many try to avoid by just ignoring the problem. Unfortunately, by ignoring the problem they are essentially digging the hole deeper and it will catch up to them.

Dealing with Tax Debt

One thing that is important to remember, though, is that the IRS wants to help you take care of your tax debt. Of course, big brother wants to get paid, but they understand that the best way to do so is to assist those who are in need. When you find yourself in a situation where your back taxes are piling up you should contact the IRS directly. You will find that the stigma that surrounds them is not as bad as it is made out to be. The operators are generally very understanding of your situation and appreciative of the fact that you are calling in an attempt to resolve your debt issues.

It is at this point that you can begin to discuss the various tax debt programs offered to you by the IRS. Did you know that you can actually negotiate your actual monthly payments with the agents? Granted, this is not lowering your overall amount owed, but it allows you to enroll into programs that match what you can afford.

Lastly, remember that if you continue to hide from your tax debt, the IRS will eventually come after you with tax liens, garnished wages, and other options in an attempt to collect on past debt. Allowing them to do so can leave you searching for a tax debt attorney.

Small business owners face unique challenges, especially when it comes to taxes. Often supporting the payroll taxes of a handful of employees, the amount of money required to maintain a small business can be quite challenging compared to a larger business. Self-employed individuals, especially those covered under a Limited Liability Company (LLC), may also find it quite expensive in regards to squaring up with the IRS.

Taxes and LLCs

Limited Liability Companies are designed to offer legal protection of self-employed or small business owners by providing a separate entity by which the business makes its transactions. This provides additional protection of the owner and/or operators from liability in the event of a lawsuit or obligations with debt burdens. In other words, a person cannot be pursued personally to satisfy business debts accrued under the LLC.

An LLC is not recognized by the IRS as a classification for tax purposes, but must file a corporation, partnership or sole proprietorship tax return instead. What this means is that the LLC is not automatically classified as a corporation by the IRS and must elect which classification to file their business taxes under. The classification, then, governs the payment structure of taxes for the business. If the LLC is made up of more than one person the business must file a Schedule K-1 form, which breaks down the share of profit and losses per member. In this way, each member of the LLC can specify their stake and claim their share of tax debt or liability fairly.

The city of Athens, Ohio has a new plan to help resolve resident back taxes. After working tireless to develop a strategy to encourage delinquent taxpayers to pay their debts, the City Council has finally approved a resolution.

Working Together

The Athens City Council unanimously approved a plan last week to give delinquent taxpayers a grace period to resolve their back taxes. The local auditor’s office will participate in the program, assisting taxpayers in a repayment plan they can afford. The program developers are hoping that by extending the offer to work with taxpayers, more delinquent residents will come forward and make good on their tax debts.

The City Council is also preparing to pass an ordinance that will allow the state’s Central Collection Agency to target delinquent income taxpayers. The ordinance, once in effect, will empower CCA to contact and manage city residents who fail to file their city income tax returns. Both efforts are aimed at collecting what is owed to the city in a cost effective way to ensure they city can continue to function on a financially healthy level.

While tax liens are not commonly publicized, they do grab media attention when the victim is a celebrity. However, don’t feel sorry for the victim just yet as they often owe thousands of dollars in back taxes to have brought about the tax lien.

Singer And Widow

R&B singer and widow to rapper Notorious BIG, Faith Evans, is in trouble with the IRS over unpaid taxes. Reportedly owing over $60,000 in tax debt for the years 2008 through 2010, Evans has found herself in the middle of a California sized tax lien.

The State of California Tax Franchise Board has issued a tax lien against Evan’s personal property if she doesn’t pay her taxes soon. Failure to pay her tax debs could result in garnishment of her bank accounts and seizure of assets like her home and cars.

Evans’ financial troubles have been plaguing her for years as she has already faced three other tax liens in prior years from the states of California, New York and New Jersey. Evans was also sued in 2010 for $1 million over unreleased videos of her late husband, which were allegedly the property of an entertainment company.

Many people fear the IRS and dealing with unresolved tax debts can complicate matters. Although most assume that the IRS is stubborn and persistent when it comes to tax debt relief, the truth is that there are actually several options available for managing unpaid taxes.

Resolving Debts

It is a common misconception that tax debts are not dischargeable in bankruptcy. There are some tax debts that do qualify for bankruptcy protection and can be managed under a bankruptcy filing. However, to be eligible for bankruptcy protection tax debts must meet certain criteria. First, the debts must be unpaid income taxes. Second, the debts must have a current tax return on file with the IRS and have been assessed at least 240 days prior to filing. Similarly, the debts must be at least three years old. Finally, eligible tax debts must not be accumulated fraudulently or have any attempt to evade payment.

If bankruptcy isn’t an option, the IRS offers two programs for taxpayers to resolve their back taxes. First, is an installment plan, in which the IRS allows for the debts to be repaid in a series of smaller payments. Typically, the debts are repaid over a period of one to two years. To qualify for the installment plan, a taxpayer must owe less than $25,000 and have a current tax return for those debts on file with the IRS. The other plan offered by the IRS is a debt settlement option, known as an Offer In Compromise. In this plan, the IRS agrees to accept less than what is owed on the debt due to the taxpayer’s financial insolvency. Qualifying for this program can be more difficult and requires financial hardship.